Rally, Inc, is an all-equity firm with assets worth $55 billion and 11 billion shares outstanding Rally plans to borrow $14 billion and use funds to repurchase shares. Raity's corporate tax rate is 21%and Rally plans to keep its outstanding debt equal to $14 billion permanentlya. Without the increase in leverage, what would be Rally's share price?b. Suppose Rally offers $5.14 per share to repurchase its shares. Would shareholders sell for this price?c. Suppose Rally offers $5.45 per share, and shareholders tender their shares at this price. What will be Rally's share price after the repurchase?d. What is the lowest price Rally can offer and have shareholders tender their shares? What will be its stock price after the share repurchase in that case?a. Without the increase in leverage, what would be Rally's share price?Without the increase in leverage, Rally's share price is $(Round to the nearest cent.)

The objective of the question is to calculate the share price of Rally, Inc. without the increase in…

Answered: Rally, Inc, is an all-equity firm with…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

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